WASHINGTON--(BUSINESS WIRE)--The National Retail Federation and the Retail Industry Leaders
Association today asked an appeals court to overturn a federal judge’s
approval of a controversial lawsuit settlement over Visa and
MasterCard’s credit card swipe fees, saying it was negotiated by only a
handful of merchants and would do nothing to bring the fees under
control.

“The truth is that there is no settlement with the retail industry, only
an agreement with a handful of merchants who do not represent the
industry as a whole,” NRF Senior Vice President and General Counsel
Mallory Duncan said. “Given that the judge knew this backroom deal was
opposed by a broad range of small and large retailers alike and allows
these fees to continue to skyrocket, it clearly should never have been
approved. This is a serious mistake the appellate court needs to
correct.”

“The retail community remains fully committed to fighting this flawed
settlement and addressing the fundamental lack of competition in the
electronic payments market,” RILA Executive Vice President and General
Counsel Deborah White said. “Quite simply, the proposed settlement not
only undermines merchants’ legal rights and fails to restrain Visa and
MasterCard’s ability to increase swipe fees with impunity, but it also
has broad implications on the rights of others in future meritorious
class action cases.”

Both organizations filed notices of appeal with the 2nd U.S.
Circuit Court of Appeals in New York earlier this year, and followed up
today with a joint brief asking the court to overturn a December 13,
2013, ruling by U.S. District Court Judge John Gleeson.

“A broad cross section of the American retail industry numbering
thousands of businesses from iconic national department store chains and
general merchandise chains to apparel outlets, specialty shops,
restaurants and one-location Main Street stores thoughtfully analyzed
the settlement and concluded that it offers them no benefit,” the brief
said. “While a settlement this skewed was bound to be unpopular, the
extent of dissatisfaction within the retail industry has been
extraordinary.”

“Approval of a mandatory settlement of such breathtaking scope in the
face of widespread and substantive objection is unprecedented and
warrants reversal,” the brief said.

The district court approved the antitrust settlement even though NRF,
RILA and other opponents argued for more than a year that it failed to
reform the price-fixing system under which Visa and MasterCard set fees
for credit cards issued by thousand of banks. Rather than lower the
fees, the card companies proposed in the settlement that they be passed
along to consumers as a surcharge. Major retailers rejected the
surcharge proposal, saying it was the opposite of what they had sought.

The 2005 lawsuit was brought by 19 retailers and trade associations, but
10 of the plaintiffs, including all of the associations, rejected the
settlement when it was unveiled in 2012. Neither NRF nor RILA was a
plaintiff in the case but both have argued against it because its
class-action status would impose its terms on thousands of their
members. Today’s brief noted that 19 percent of merchants by card volume
formally objected to the settlement and that 25 percent opted out,
amounting to a “Who’s Who of American merchants.”

The settlement would grant only pennies on the dollar compared with
overcharges the lawsuit claimed and small retailers would see as little
as a few hundred dollars each. Retailers who reject the monetary
settlement would still be bound by other restrictions the court would
not allow them to opt out of, including a prohibition on future lawsuits
over the fees.

The brief cited a number of legal errors in the decision, including
failure to adequately balance the monetary relief against the
requirement to give up future legal claims, dismissing “substantive and
thoughtful” opposition and ignoring a court-appointed expert’s opinion
that the proposal for surcharging was of “uncertain” value that would
“have only a small impact” on swipe fees.

Swipe fees are charged to merchants by banks to process credit card
purchases and average about 2 percent of the transaction. They have
tripled over the past decade and currently total about $30 billion a
year, driving up costs for consumers.

NRF is the world’s largest retail trade association, representing
discount and department stores, home goods and specialty stores, Main
Street merchants, grocers, wholesalers, chain restaurants and Internet
retailers from the United States and more than 45 countries. Retail is
the nation’s largest private sector employer, supporting one in four
U.S. jobs – 42 million working Americans. Contributing $2.5 trillion to
annual GDP, retail is a daily barometer for the nation’s economy. NRF’s This
is Retail campaign highlights the industry’s opportunities for
life-long careers, how retailers strengthen communities, and the
critical role that retail plays in driving innovation. www.nrf.com

RILA is the trade association of the world’s largest and most innovative
retail companies. RILA members include more than 200 retailers, product
manufacturers and service suppliers, which together account for more
than $1.5 Trillion in annual sales, millions of American jobs and more
than 100,000 stores, manufacturing facilities and distribution center
domestically and abroad.